Loonie and Yen in focus

11 July, 2018

The USDJPY has made some strong moves as of late and it's well overdue in the current market environment. The Yen has been resilient recently, as traders were keen to hold onto some safety against the US economic environment amid a few worries. However, with the recent JOTLS Job Openings report out today showing only a slight decrease to 6.64M (6.62M exp) in the summer season, the market is very upbeat on the dollar and equities as a result. US CPI is likely to be the next major mover in the market, as markets will be looking to see if inflation is progressing at the rates the FED predicts or if there are any surprises that could cause swings in the USD. Certainly anything above the expected rate would be a signal for further hikes from the FED in coming months. But for now, the focus is back on the USDJPY as it continues its bullish run on the back of a stronger USD.

Looking at the USDJPY on the charts and we still have the bullish trend line in play, despite some fake breakouts which lead to a double bottom and the bulls regaining control. So far the USDJPY has pushed through resistance at 111.083 and has pulled back slightly, with a long term potential target of 112.033 at this stage. In the event the bears regain control I would expect to see markets shift lower and try and crack the trend line in play. With support levels found at 109.986 and 109.347 in this instance.

The other key mover tomorrow will be of course the CAD as the Bank of Canada (BoC) is set for its interest rate decision. At present the market has already priced in a hike which seems all but certain at this stage. Expectations are building that with the hike the main focus will be on the monetary statement due out shortly after where the BoC sets out its forecasts and expectations of the economy in the months to come. The USDCAD as a result will be of a major focus as investors will be watching to see if it can bouncer higher, or if the BoC is more hawkish than expected and we see a drop.

On the charts it looks to me like investors are manoeuvring the USDCAD towards a neutral position as no one is too sure on what the BoC is set to say. At present the USDCAD is sitting just above support at 1.3101 at this stage, with higher highs being the theme over the last day; showing that markets are upbeat. If the USDCAD does move higher then resistance at 1.3232 and 1.3296 are likely to be key points of focus here. I would also be watching for a potential bullish trend line that could come into play in the long run, as long term I still believe the USDCAD to be quite bullish.

Smoke continues to linger across market sentiment following the smoke grenade President Trump launched over the weekend with the threat of adding further tariffs on Chinese imports at the end of the week.

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